Can retailers ride out the high street storm?

Financial ratings expert Experian has run the rule over more than 1,200 of Britain’s towns, to see how well they are equipped to ride out the retail storm hitting the high street.

Its new report, shared exclusively with The Grocer this week, shows how brittle business resilience, a rapidly ageing population and a huge shift to online at the expense of the traditional stores are sweeping across hundreds of towns.

But while some towns are seemingly heading for retail ruin, for others there is light at the end of the tunnel. So what key factors are behind the winds of change blowing through our high streets?

Experian’s report was commissioned by the Association of Town Centre Management, after it became concerned at the lack of hard data held by town centre teams spearheading the government’s efforts to salvage the high street under the Mary Portas Review.

The report shines light on the vulnerability of retailers in 1,209 towns across the UK, with Experian mining data based on factors including retailers’ adaptive capacity, the proportion selling in growth industries and the general economic health of their local populations.

Alarmingly, the report classifies almost half (46%) of all Britain’s towns as being in areas of ‘low business resilience’ as of the end of 2011, hit by factors such as higher-than-average levels of retail vacancies, crime and low earnings.

Propping up the pile was the North East, where all towns were rated as either very low or low in resilience. Areas including the East Midlands, West Midlands and Yorkshire and the Humber all have more than two-thirds of their towns classified as in areas with ‘low resilience’, with 67% of Welsh towns also in the ‘most at risk’ category. However, more than two-thirds of London’s town centres have ‘high resilience’, with 42% of towns in the South East in areas of ‘very high resilience’.

A real struggle
“These figures show how likely it is that town centres will struggle in the future,” says report author and Experian lead consultant James Miller. “I’m afraid it really does suggest that places like the North East are going to suffer,” he adds.

Experian warns that town centre footfall will continue to drop in those areas and town centres will be forced to shrink fast. And the increased age of British shoppers is driving the changes, too. Experian suggests that between 2012 and 2020, 79% of town centres in Britain will see 10% or more growth in their over-50 population, with 431 town centres seeing this figure shoot up by more than 15%.

Again, the results vary widely, with the East Midlands forecast to see 84% of its towns undergo “very high” growth of over-50s by 2020, compared with London, where nearly half of town centres can expect to see lower than average growth in the older age category.

The third big driver is the shift to online. Experian has monitored the behaviour of eight million internet users, and the results suggest a massive increase in consumers ordering goods online. The report claims that by 2018 more than half the population in at least 500 towns will be frequent users of e-commerce.

Experian claims it is towns in “middle England”, with relatively high proportions of white-collar workers and mid-market families that produce the most internet savvy, price conscious consumers. It predicts that the East Midlands will see 81% of its towns boast heavy users of online shopping by 2018, the same for 72% of towns in the East. But in London, its prediction is just 18%.

“There are certain types who are demonstrating a greater propensity to shop online than others,” says Miller. “Interestingly, these are not the country’s most affluent or cosmopolitan urban groups but rather lower to middle income groups.”

Experian admits it does not have the answers as to how teams should react to its findings, although the report does make recommendations. These include towns in areas worst hit by the economic crisis being prepared to shrink and to increasingly target customers with low incomes. Those with the biggest increases in elderly populations, it claims, should look at adapting town centres to include health services, good access and public conveniences.

The report concludes that the greatest threat to traditional retail is the internet, but it claims that areas such as mobile commerce will open up opportunities.
Martin Blackwell, CEO of the ATCM, said the report provided important information for the 400 town teams set up as a result of the Portas Review and would also help guide local authorities on where to target spending such as the £10m distributed to all local authorities in England by the government.

“Retail space may have to shrink in some cases to survive,” says Blackwell. “This doesn’t mean they will disappear, just that they will simply be different in the future.” Just how different, as Experian concludes, will depend very much on what the postcode is.